Purva Asset Management Pvt Ltd, a subsidiary of real estate firm Puravankara Ltd, has launched a ?750 crore alternative investment fund (AIF), to invest in affordable housing projects as well as plotted developments.
Bengaluru-based Puravankara develops budget homes under ‘Provident’ brand, plotted projects under ‘Purva Land’ and premium housing under the ‘Puravankara’ brand.
The Category II AIF Purva Real Estate Fund, which recently got the mandatory Sebi approval, will be managed by Purva Asset Management, and the first fund scheme is called ‘Purva Residential Excellence Fund-1’. It plans to raise ?500 crore for the fund along with a ?250 crore greenshoe option, from mainly domestic investors including family offices and ultra-high networth individuals.
The first fund will invest 6-8 mid-sized projects for affordable housing with a four-year development timeline, and plotted projects of up to 1.1-1.5 million sq ft. The projects will be in Bengaluru, Pune, Chennai, Hyderabad and Mumbai Metropolitan Region. It is aiming to achieve the first close of ?200 crore in the next two months.
In 2020, IFC and IFC Emerging Asia Fund partnered with Puravankara to invest $76 million in the latter’s affordable housing projects in India. “The most important aspect in our business is requirement for capital and given how well Provident has performed, we wanted to create a dedicated fund for it. As we raise these funds, they will be used to acquire land for the projects. The fund will have a revenue sharing arrangement with Provident/Puravankara. The larger idea is that Purva Asset Management will build various pools of capital going forward. Once this fund is raised, there would also be a second fund," managing director Ashish Puravankara said.
Puravakara is a sponsor to the fund and will two will co-invest in projects and acquire land parcels. Puravankara said there are protection clauses for the fund and its investors incorporated including a price protection clause. Even as per the agreement, the revenue sharing kicks in as soon as a project is launched. At the end of 66 months, which is the fund life, any residual investments will be bought back by Puravankara at a pre identified internal rate of return or IRR of 12%.
The fund will operate at an arm’s length and the company is putting together a three-member advisory board.“We believe that post pandemic, the real estate industry is going through a massive consolidation, where there will be five top developers in each city. As an organization, our vision is to see how each of our three businesses has capital flow and growth," Puravankara said.
